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Syncrude Canada Ltd.'s oil sands processing facility stands in Fort McMurray, Alberta, Canada, on Tuesday, June 29, 2010. Canada's oil sands, a mixture of sand, clay, water and a heavy oil called bitumen, contain the world's second largest proven concentration of crude oil reserves at about 170 billion barrels.JIMMY JEONG

Another wave of ugly news is looming for oil producers already battered by weak oil prices.

Every year, companies hire outside evaluators to tally up their reserves — a calculation of how much resource in the ground can be recovered technically and economically.

With U.S. benchmark crude dipping below US$40 a barrel for the first time since early 2009, the economics are looking especially dicey these days. Oil that might have been viable to produce at stronger prices may not be anymore.

Reserve reductions have tangible financial consequences. A company may have to take a charge against its financial results. And for many producers, it makes borrowing money from banks problematic.

"It all sort of feeds itself in an ugly vicious cycle," said Sonny Mottahed, CEO of Black Spruce Merchant Capital.

Keith Braaten, president and CEO of GLJ Petroleum Consultants in Calgary, said his firm is going to be busy doing up annual reserve evaluations for clients throughout the fall, wrapping up preliminary reports around the end of the year.

Companies normally disclose the reserve figures along with their annual reports early the following year.

"I think a lot of companies took a bit of a haircut last year-end because prices were low then," said Braaten. In late 2014, crude had already begun its precipitous decline to around the US$60 a barrel mark from mid-year highs above US$107 a barrel.

"I am expecting to see more of a haircut this year because we are seeing prices weakening further than they were and staying low for longer than we expected."

The oilsands are expected to feel the brunt of it because one single project represents a large amount of oil, he said.

"So when they become uneconomic and they're cancelled indefinitely and those reserves fall off the books, they are massive volumes."

By contrast, a producer may have dozens of wells in an oil deposit like Alberta's Cardium play, for instance. Depending on their location, some of those wells might be susceptible to a reserve writedown, while others may remain in good shape economically. Therefore, the impact to those producers wouldn't be as severe as in the oilsands.